2021 (1) TMI 404 - AT - Income Tax

Treatment of long term capital gain as short term capital gain - assessee before the Assessing Officer claimed that possession of the asset was acquired on 29.09.2006 on payment of substantial amount - Assessing Officer held that Kabja Receipt/Sadakhat is nothing but afterthought and attempt to set right the wrong claim of long term capital gain of the assessee - HELD THAT - Substantial payment of consideration was paid through banking channel on or before 29.09.2006. Thus this fact is strengthening the contention of the assessee that substantial payment was made before execution of Sadakhat Kabja Receipt. So far as objection of Assessing Officer that the stamp paper on which Sadakhat Kabja Receipt was executed is in the name of D. M. Singhla. No further enquiry was made by Assessing Officer either from the stamp vendor agency or from D. M. Singhla advocate. In absence of any adverse evidence against the documentary evidences furnished by the assessee the suspicion of Assessing Officer that Sadakhat Kabja Receipt is entry dated is not sustainable. Considering that substantial payment of consideration was paid on 29.09.2006 and that the property was ultimately transferred by agreement dated 29.09.2006. Thus the property was clearly held for more than thirty six months. As the assessee clearly held the property/asset from part of Block No.153B of Sarthana Tal. Kamrej Dist. Surat for more than thirty six months and clearly entitled for benefits of long term capital gain. Deduction u/s 54F - HELD THAT - Assessing Officer after treating the capital gain as short term capital gain against long term capital gain as claimed by assessee not examined the claim of deduction under section 54F. Thus reverse the treatment of short term capital gain as long term capital gain therefore the ground no.2 is restored back to the file of the Assessing Officer to examine the claim of assessee and passed the order in accordance with law after giving opportunity of hearing to assessee. Appeal of the assessee is partly allowed.

Summary

Issues:
1. Treatment of long term capital gain as short term capital gain.
2. Deduction under section 54F.

Issue 1: Treatment of long term capital gain as short term capital gain:
The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) regarding the treatment of a transaction as Short Term Capital Gain instead of Long Term Capital Gain. The Assessing Officer disallowed the long term capital gain and claimed it as short term capital gain, leading to the denial of deduction under section 54F. The appellant contended that the property was held for more than thirty-six months, qualifying for long term capital gain. The appellant provided evidence of substantial payments made before the execution of the agreement and possession of the property. The Tribunal analyzed the documentary evidence and observed that the substantial payment was made through banking channels before the agreement's execution, supporting the appellant's claim. The Tribunal referred to a decision by the Punjab & Haryana High Court to support the appellant's argument. The Tribunal concluded that the appellant qualified for long term capital gain, overturning the lower authorities' decision.

Issue 2: Deduction under section 54F:
The Tribunal noted that the Assessing Officer did not examine the claim of deduction under section 54F after treating the capital gain as short term instead of long term. Since the Tribunal reversed the treatment of capital gain, it restored the issue of deduction under section 54F back to the Assessing Officer for reexamination. The Tribunal directed the Assessing Officer to pass an order in accordance with the law after giving the appellant an opportunity to be heard. Consequently, the Tribunal partly allowed the appeal of the assessee, addressing the issue of deduction under section 54F.

In conclusion, the Tribunal's judgment addressed the issues of treating long term capital gain as short term capital gain and the deduction under section 54F. The Tribunal found in favor of the assessee regarding the treatment of capital gain, considering the evidence provided and legal precedents. The Tribunal also directed the reexamination of the deduction under section 54F by the Assessing Officer. The appeal was partly allowed, providing relief to the assessee on the issues raised in the case.